NCB grows to fourth in region, defends Guardian offer

NCB Financial Group Limited defended its takeover bid for Guardian Holdings Limited, which has met with resistance from some minority GHL owners in Trinidad & Tobago.

Jamaica's top banking group also reported to shareholders at its annual general meeting on Friday that the company was now ranked No. 4 in the region, based on pretax profit.

Deputy CEO and Chief Financial Officer Dennis Cohen quoted an independent study which indicated that the NCB Financial Group earned the equivalent of US$148 million in its 2017 financial year. Republic Bank at US$198 million topped the region followed by RBC Bank and then CIBC FirstCaribbean International.

"It was our aspiration to be in the top five financial institutions in the region and this metric offers independent validation of our progress," said Cohen. Some of the gains came from NCB's investment in Guardian, in which it first acquired a 29.99 per cent stake in 2016.

NCB is now trying to increase its holdings in Guardian to 62 per cent at US$2.35 per share - an offer that remains on the table until February 2. Provided the company gets 50 per cent of GHL shares following the offer, it would subsume Guardian into NCB Financial's consolidated results.

CAPITAL ALLOCATION DECISION

Cohen told the Financial Gleaner after the meeting of shareholders that NCB is aiming for 62 per cent of Guardian, rather than a higher stake, due to its capital allocation. NCB Financial will pay up to US$174.4 million for the shares.

"That is really a capital allocation decision. We have looked at the capital of the NCB group and we have made the decision that in respect of the total capital we wish to commit to that particular investment and it works out that we believe that 62 per cent is an appropriate level for that investment," he said.

Minority shareholders in T&T want the roughly US$3.29 price initially paid by NCB to key shareholders when it bought into the company two years ago. Outspoken minority shareholders in Trinidad argue that offering a separate price equates to a vulgar act of discrimination.

Dave Garcia, NCB's group general legal counsel and corporate secretary, told the Financial Gleaner that their instructions from legal counsels in T&T representing GHL and NCB indicate that the offer was legal, and that the banking group had followed the bylaws of T&T in respect of timelines for the offer, among other issues.

"The manner in which the transaction has been executed is legitimate," Garcia asserted.

He said, regarding the relevant bylaws, that when there are two transactions occurring within 90 days of each other, it affects the pricing of the second transaction. But, the provision does not apply when the offer is made after 90 days have passed, he added.

"This is a case in which well over a year has passed between the initial offer and the second offer," Garcia said.

Last year, NCB Financial made record annual profit of $19 billion. In the banking group's first quarter ending December 2017, profit rose 28 per cent to $4.6 billion. NCB will pay interim dividends of 70 cents per share or $1.72 billion overall, based on the first quarter results.